Thursday, March 14, 2013

'The Poor Rich': More Tiresome Mainstream Media Obfuscation

By Manifesto Joe

Several days ago, newspapers all over the U.S. had wire editors stupid enough to drink another round of strong Kool-Aid. A "story" by Stephen Ohlemacher of The Associated Press went viral in the MSM. The crux of it: The share of federal income taxes that the rich pay is close to a peak since 1979.

What this "story" amounted to was cherry-picking of the worst possible kind. It was misleading and generally beside the point. But, let's start by examining the thesis:

For 2013, families with incomes in the top 20 percent of the nation will pay an average of 27.2 percent of their income in federal taxes, according to projections by the Tax Policy Center, a research organization based in Washington. The top 1 percent of households, those with incomes averaging $1.4 million, will pay an average of 35.5 percent.

Those tax rates, which include income, payroll, corporate and estate taxes, are among the highest since 1979.

The average family in the bottom 20 percent of households won't pay any federal taxes. Instead, many families in this group will get payments from the federal government by claiming more in credits than they owe in taxes, including payroll taxes. That will give them a negative tax rate.

Please note that what this "story" by Ohlemacher (who obviously has figured out who ultimately pays his salary) focuses on is federal income taxes, exclusively. Conveniently omitted are:

(1) State and local taxes, which are notoriously regressive.

(2) Corporate income taxes. About two-thirds of U.S. corporations, among them the largest, pay ZERO federal income tax, and some even got credits.

(3) Social Security and Medicare payroll taxes, which stop entirely after a certain income level, so they are by definition as regressive as a tax can be.

(4) The assorted breaks that go only to the very, very rich -- we're talking here 0.1%, not just the top 1%. Some of them are mind-blowers.

(5) The U.S. economy doubled in size in 30 years, and yet real wages for ordinary people remained about the same. Obviously somebody has been profiting handsomely from this increase in productivity, and it hasn't been the ordinary run of Americans. Given this trend, wouldn't one expect the top 20%, and even the top 1%, to pay a lot more?

What happened? When newspapers across the U.S. took a great big swig of this Kool-Aid it was, in essence, an acceptance of about one-sixth of relevant data when one honestly and thoroughly examines the effect of taxation on the growing gap between rich and poor. In other words, this "journalist" wrote a "story" based on one of six factors in the overall picture.

Mr. Ohlemacher did one-sixth of the job as well as one could expect. Here's a link to his original "story," courtesy of USA Today.

But now, let's examine the other five sets of data.

(1) A New York Times series on the growing American gap between rich and poor points out:

While the federal government has largely stuck by the principle of progressive taxation, the states have gone their own ways: tax policy is particularly regressive in the South and West, and more progressive in the Northeast and Midwest. When it comes to state and local taxation, we are not one nation under God. In 2008, the difference between a working mother in Mississippi and one in Vermont — each with two dependent children, poverty-level wages and identical spending patterns — was $2,300.

I live in a state (Texas) where there is no income tax. In contast, sales taxes and user fees are very high. These obviously hit consumers at the lower income level, at which more money is spent on basic goods and services, much harder than they affect consumers who spend relatively less on such things. In essence, such taxes are an effective way of punishing the poor for being that way. Texas ranks 5th on the list of 10 most regressive tax states, according to one study. Here's a link to that one.

I'll give my home state credit for one big thing -- grocery items are mostly exempt from the sales tax (although not all convenience store operators have heard that news yet, and related enforcement is very lax). Oklahoma, where I once lived for something under a year and a half, has a state income tax. But they levy a sales tax on everything, including ALL groceries. That wipes out most of the progressive effect that the state income tax has.

(2) The corporate income tax rate in the U.S. is alleged to be relatively high. The problem is, not very many corporations pay it, and that's especially true of the largest and most powerful ones. Even economic conservatives, when pushed into a corner, will admit this. I found a New York Times piece in which Bruce Bartlett, a former Reagan administration official, came clean on this issue. (Sorry, the link no longer works.)

What has the effect been on the federal budget -- which is of so much concern to both major political parties now? Here's a hint: Barlett and Steele, the reporting team that wrote America: What Went Wrong?, reported that in 1959, corporate income taxes comprised 39% of IRS revenue. By 1989, that had declined to 17% And, by the way, those are IRS figures.

It's one thing for Worthington Farthington, CEO of Corporation X, to pay higher personal income taxes than Jack Shitt of Biloxi, Miss. But what if Corporation X, which employs Jack part time with no benefits, pays, effectively, no income tax? And that is increasingly the case.

(3) Yes, I know that corporations pay into the Social Security system, and that they support Medicare as well. But look at the bigger picture. The employee pays 6.2% for Social Security, and the employer matches that, for an effective federal rate of 12.4% But the payroll tax is capped at $106,800, which I would place as the upper threshold of middle-class earnings. No taxes are paid on anything above that. For an illustration of the effect this has, here's a link to the Center for Economic and Policy Research.

This is called regressive taxation. Any questions, class?

Although Social Security's general effect on U.S. society since its inception in 1935 has been a reduction in poverty, the tax that supports it is clearly regressive. But this was largely by design. One of the reasons it has always been this way is to give fatcats some sort of incentive to reluctantly participate in the system.

Now, the swine don't even want to do that. They have all manner of schemes to "privatize" Social Security, to phase it out, give it over to the tender mercies of Wall Street. The arrogance of these people is such that even asking them to do their "part" in a regressive tax structure is just too damned much.

(4) There are tax breaks that go only to the VERY, VERY wealthy that are astonishing. For the sake of brevity, I will cite only one example. The corporate jet tax loophole, it is estimated, will be worth at least $3.2 billion over the span of 10 years. Some estimates, such as the one on this link, put the break's 10-year worth at more like $4 billion.

(5) So, who's been getting rich since 1980, with the U.S. economy doubling in size? Here's a link on the subject. Here's a hint: It hasn't been me, and it's unlikely, if you've read this far, that it's been you, either.

It's mind-boggling to still be hearing allegations that American mainstream news media have a liberal bias, when it's so obvious to whom they are kowtowing. Mr. Ohlemacher certainly seems to know that it's the U.S. Ownership Class that ultimately pays his salary.

2 comments:

Anonymous
said...

re:>>They have all manner of schemes>>to "privatize" Social Security

"The owners of this country shipped all your good union jobs, with the good benefits, overseas over the past 30 years.And now, they're coming for your retirement money. And you know what? They'll get it. They'll get all of it."----George Carlin

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